Mysterious Art Funds—and Why They’re That Way

Art funds used to be a hot topic. Then they faded from view in a haze of murky performance numbers and sketchy details. Kenny Schachter’s recent report from New York’s Armory Week suggests they’re making a comeback in unexpected ways:

L.A.’s OHWOW is a fashionable place to buy art—and then turn around and immediately resell it (see: Lucien Smith and others). They had a lot of hipster buzz clamoring for Torey Thornton, about to be the next overcooked market wunderkind, but I wonder if the up and comer has any idea of the limited partnership offering the gallery recently circulated to some of its select clients soliciting investments in a fund of their artists.

Meanwhile, the Wall Street Journal explains why there’s such a dearth of information:

But art funds are prohibited from discussing their activity publicly because of strict restrictions on solicitation, says Enrique Liberman, president of the Art Fund Association, so it’s impossible to say how they perform. Every one is different anyway, because every piece of art is unique. And the art market is notoriously fickle—even in a booming market, certain pieces don’t sell at a profit.

For those who are interested, an art fund can be hard to find because of the restrictions on solicitation. Art funds aren’t listed on any exchange, and in most cases once they are in business they’re closed to new investors. Investors generally are drawn from informal networks of wealthy individuals.

There are roughly 45 art funds around the globe, according to Mr. Liberman. Many acquire art according to an aesthetic, regional or historic theme. For instance, London’s Fine Art Fund Group runs funds that invest in Chinese and Middle Eastern art, as well as broader funds.

Speaking of Fine Art Fund, in the past we’ve reported that Philip Hoffman’s Fine Art Fund has been moving away from running art funds into the advisory business. Hoffman says that is not the case and that they’ve raised money for new funds in recent years. They’re also managing single-owner funds.